September 24, 2012
--- The Financial Industry Regulatory Authority
(FINRA) fined Merrill Lynch, Pierce, Fenner & Smith Inc. $500,000 for failing
to file hundreds of required reports. ---
In its statement, FINRA said the brokerage was
being censured for supervisory failures that allowed widespread deficiencies in
filing reports, including customer complaints, arbitration claims, and related
U4 and U5 filings, and for its failure to file the required reports.
According to the organization, Merrill Lynch’s violations
went undetected for several years and may have hampered investors’ ability to
assess the background of certain brokers via BrokerCheck, FINRA’s public
disclosure program. They also may have compromised firms’ ability to conduct
background checks when making hiring decisions, reduced the ability of
securities regulators to review brokers’ transfer applications and hindered
FINRA from promptly investigating certain disclosure items.
FINRA found that from 2007 to 2011, Merrill Lynch failed to file, or file on
time, more than 650 reports, including customer complaints and customer
From 2005 to 2011, Merrill
Lynch failed to report, or report in a timely manner, customer complaints, and
related Forms U4 and Forms U5 between 23% and 63% of the time. Merrill Lynch inadequately
trained and supervised personnel responsible for customer complaint tracking
and reporting, and did not have systems in place to identify the high volume of
customer complaints that were not being acknowledged or reported. As a result, the
firm failed to acknowledge nearly 300 customer complaints in a timely manner.